BofA Securities has revised its stance on Bumble Inc. (NASDAQ: BMBL), downgrading the company's stock from Buy to Underperform and significantly reducing the price target to $5.50 from the previous $12.00.
The adjustment follows Bumble's announcement of a substantial reduction in its financial outlook for the fiscal year 2024, coupled with concerns over the company's revenue growth prospects.
Bumble reported second-quarter 2024 total revenues of $268.6 million, a 3% increase year-over-year but still falling short of the $273.2 million expected by analysts. Despite this, the company's EBITDA for the quarter was a bright spot, coming in at $75 million, which surpassed the Street's estimate of $72 million.
However, the average revenue per paying user (ARPPU) for the Bumble app decreased by 9% year-over-year to $25.8, attributed to geographic mix, though the net addition of 27,000 users was slightly above analyst predictions.
The management's updated guidance for 2024 anticipates revenue growth of only 1-2%, a stark decrease from the previously forecasted 8-11%. Furthermore, Bumble's forecast for the third and fourth quarters of 2024 indicates a potential year-over-year revenue decline, with the midpoint of the guidance suggesting a continued deceleration.
Bumble's leadership has decided to "reset" their product and revenue strategy during a period marked by intensified competition from a major rival in the industry.
Bumble reported mixed Q2 2024 results, revealing a 3% increase in total revenue to $269 million, supported by a 14% rise in paying users. However, the company expects a slight revenue decline in the third quarter and modest full-year growth.
Notably, net earnings saw a significant increase to $38 million, up from $9 million the previous year, due to a 9% reduction in operating expenses. Amid these financial updates, Bumble is undergoing a strategic shift, focusing on enhancing customer experience and engagement, particularly in mature markets.
The company has also acquired the community app Geneva in an effort to diversify its offerings. These are recent developments that investors should be aware of. As part of its new strategy, Bumble anticipates a 1% dip in Q3 revenue and projects 1-2% revenue growth for the full year.
InvestingPro Insights
In the wake of BofA Securities' downgrade, a closer look at Bumble Inc. (NASDAQ:BMBL) through InvestingPro metrics and tips may offer investors additional perspective. Despite the revised financial outlook, Bumble's aggressive share buyback strategy as noted in an InvestingPro Tip suggests management's confidence in the company's value. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, which could be an indicator of potential undervaluation.
From a financial standpoint, Bumble's market capitalization stands at $680.21 million, with a forward P/E ratio of 25.38, reflecting investor expectations of future profitability. The revenue growth over the last twelve months up to Q1 2024 was 14.98%, indicating a strong performance in the past year. However, the recent price action reflects investor sentiment, as the stock price has experienced a significant drop of over 55% from the previous year.
For investors considering Bumble's stock, there are additional InvestingPro Tips to explore, including insights on earnings revisions and stock price volatility. With a total of 18 InvestingPro Tips available, investors can gain a more comprehensive understanding of the company's financial health and market position by visiting https://www.investing.com/pro/BMBL.
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